Ex-Goldman trader’s fraud trial due to begin

The trial of former Goldman Sachs bond trader Fabrice Tourre will begin in New
York this week in the most high-profile case linked to Wall Street and the
financial crisis.

In a much-quoted email sent on January 23, 2007, to his girlfriend at the time, Fabrice Tourre (pictured) said of the financial markets that the “whole building is about to collapse any time now”.Photo: Getty

The SEC’s case is that Tourre “handed Little Red Riding Hood an invitation to grandmother’s house while concealing the fact that it was written by the Big Bad Wolf.”

According to the SEC, the wolf in question is John Paulson, a hedge fund billionaire who enlisted the help of Goldman Sachs to bet against the sub-prime mortgage market using an insurance product called a credit default swap.

Mr Tourre, a French national, was 28 at the time and employed by Goldman Sachs in New York. He became the bank’s principal employee working on what became Abacus, known in the financial services sector as a synthetic collateralised debt obligation (SCDO).

The SEC said Abacus’s marketing materials failed to disclose Paulson’s role in picking the underlying assets, instead saying that a subsidiary of ACA Capital Holdings selected them.

Related Articles

Tourre’s goal, the SEC contends, was to deceive investors into buying the liabilities of Abacus.

In a much-quoted email sent on January 23, 2007, to his girlfriend at the time, Tourre said of the financial markets that the “whole building is about to collapse any time now”.

“Only potential survivor, the fabulous Fab… standing in the middle of all these complex, highly-leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!”

Tourre, who has left Goldman, is expected to give evidence in his defence which will argue that the Abacus offering documents, while not disclosing Paulson’s role, contained all the information investors might consider material.